Suppliers prepare Europe MEG market for an August increase

27 July 2011 18:01  [Source: ICIS news]

LONDON (ICIS)--August contract price ideas for European monoethylene glycol (MEG) remain firm, despite a drop in Asian price nominations, suppliers said on Wednesday.

“The European contract price should go up: C2 [ethylene] went up and the market in Europe is very short on availability,” a producer said.

A second supplier agreed that an increase is inevitable because demand is in place and supply is limited.

“We have to go up – it is only a question of how much,” the supplier added.

Due to exchange rate volatility and mounting concerns over whether US lawmakers will reach a consensus over the lifting of the debt ceiling before 2 August, neither side has been specific with its price proposals.

The August settlement for upstream ethylene in Europe, which went up by €30/tonne ($21/tonne) to €1,120/tonne, was only fully confirmed late on Wednesday.

“We will have to wait until early next week to see what happens with oil [and] the exchange rate. If nothing happens, I expect a rollover,” a buyer countered. 

This contradicts views expressed by customers that August MEG prices were weakening because of softening sentiment in upstream ethylene. "The MEG price will drop in line with the decrease in Asia, taking into consideration spot prices, nominations and ethylene," one buyer said.

The Asian price is normally a key factor in European contract discussions. Major producers nominated decreases for August of $50-60/tonne to $1,300-1,320/tonne CFR (cost & freight) Asia 

The European July MEG contract price was agreed at €1,044/tonne FD (free delivered) NWE (northwest Europe), up €29/tonne compared with June.  

($1 = €0.69)

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By: Caroline Murray
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